Texas rose one spot to No. 17 on the 2012 State New Economy Index, the latest report from the Information Technology and Innovation Foundation. The last report was in 2010.

The non-partisan think tank ranked how the 50 states are transitioning to the Knowledge Economy based on 26 indicators in five key areas: skilled jobs, globalization, economic dynamism, the digital economy and innovation capacity.

Report co-author Luke Stewart, an economic analyst for the foundation, attributed Texas’ higher rank to better scores in its online population, e-government, venture capital, three education indicators. But there’s still plenty of room for improvement.

Massachusetts was No. 1.

Here’s how Texas ranked in the report’s various indicators:

* No. 2 on globalization based on strong export-based manufacturing and trade with Mexico.

* No. 23 in “knowledge jobs.” Texas fared well in the productivity of manufacturing workers, but its scored low in three education areas: workforce education (No. 37), migration of knowledge workers from other states (No. 32) and immigration of knowledge workers (No. 43).

* No. 22 in innovation capacity. Texas rose nine spots to No. 10 for venture capital, with venture dollars representing 0.15 percent of Texas workers’ earnings vs. 0.1 percent in 2010. It was No. 13 for scientists and engineers as a percentage of the workforce. Those indicators were offset by coming in at No. 40 for non-industry R&D investment and No. 49 for a green economy.

* Texas performed the worst in the digital economy indicators. It was No. 39 in online farms. Even though the state rose 16 spots in online population, it was still No. 40. Its 80-percent online population was average. Utah, for example, has 90 percent of its households online.

The top 20 states in the index

Rank

State

1

Massachusetts

2

Delaware

3

Washington

4

California

5

Maryland

6

Virginia

7

Colorado

8

Utah

9

Connecticut

10

New Jersey

11

New York

12

New Hamphsire

13

Minnesota

14

Oregon

15

Vermont

16

Arizona

17

Texas

18

Georgia

19

Michigan

20

Illinois

The two states that have had the toughest time making a transition to the New Economy are Mississippi (No. 50) and West Virginia (No. 49).

To spur economic activity, the report said states should focus more on innovation through three main policy areas: collaborate with communities and even other states; develop creative incentives and programs to support innovation; and implement manufacturing tax, trade, technology and talent policies to spur manufacturing growth.